TMI Blog2015 (12) TMI 973X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the learned Assessing Officer himself, and secondly the steep increase in the wastage is not supported by any evidence like consequential increase in production etc. Lastly,if not the least, the Assessing Officer has not made blind addition and before 5.3.2004 it was allowed - Decided against assessee Deduction under Section 80HHC - Held that:- Deduction under Section 80HHC of the Act is available only on showing fulfilment of conditions specified therein and there could be no presumption that surrender made on account of unexplained stocks represented export income. The assessee was unable to give any explanation. There could be no presumption that additional amount surrendered represented income from exports. Deduction under Section 80HHC of the Act can be claimed only on showing facts which made the assessee eligible for the deduction. The burden to prove these facts was on the assessee and not on the Revenue. - Decided against assesseee Deduction on account of interest received on FDRs under Section 80HHC - Held that:- Tribunal while rejecting the aforesaid contention recorded as on the plea that in the impugned order on the ground that the learned CIT(A) erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deduction under Section 80HHC on the interest received on FDRs which though were maintained for the purpose of taking limits from the Banks and thus was factually directly and intrinsically related to the business activities of the appellant and thus was eligible for the impugned deduction in view of established principles of law? 2. A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. The assessee is a limited company based at Ludhiana. It is engaged in the business of manufacturing and trading of hosiery knitted cloth and garments. A survey operation under Section 133A of the Act was conducted on 5.3.2004 at the business premises of the assessee. During the course of survey operation, the assessee surrendered an amount of ₹ 20 lacs. It filed return of income for the assessment year 2004-05 on 31.10.2004 declaring income of ₹ 25,94,290/-. The case of the assessee was processed under section 143(1)(a) of the Act on 25.3.2005 on the returned income and was selected for scrutiny. The assessee filed the requisite information/documents. During the course of assessment, issue of wastage, surrender amount of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee. The Tribunal had disallowed 50% of the wastage claimed by the assessee. According to the learned counsel for the assessee, no addition could have been made without rejecting the books of account especially when every entry of wastage was vouched. 5. On the other hand, learned counsel for the revenue relied upon findings recorded by the Tribunal to the effect that in the entire year, the average wastage per day came to 66.734 kgs whereas during the impugned period for 25 days, wastage shown was 8897.267 kgs. giving an average of 355.89 kgs. 6. No explanation much less satisfactory explanation has been given by the assessee except to urge that the books of account were not rejected by the Assessing Officer. The vouching of the wastage would be with regard to sale etc. but that by itself would not entitle the assessee to claim any excess amount thereunder. The relevant finding recorded by the Tribunal while adjudicating this issue is very material which reads thus:- 3. The next ground raised by the revenue is that the learned CIT (A) erred in deleting the addition of ₹ 20,12,092/- made on account of excess wastage, claimed by the assessee. The contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Quantity (Kg.) Particulars Quantity (Kg) Opening stock 3300.00 Sale 12770.000 Garments 22689.656 Closing stock 13219.656 Total 25989.656 25989.656 Quantitative details of closing stock as on 31.4.2004 (Garments) Particul ars Quantity (Pcs) Quantity (Kg.) Particulars Quantity (Pcs) Quantity (Kg) Opening stock 4550 1706.25 Sale Local 166981 62617.875 Finished goods 298646 143576.923 Sale Bison 39795 14923.125 Sale Export 45914 1721 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts are audited one. The Assessing Officer has not pin pointed any defect in the accounts. As far as wastage is concerned, it depends upon so many factors like quality of cloth use of particular thread change in the fashion, demand of particular parties and also the use of garments i.e. the garments used by small children are having excess wastage due to fashion and design etc., therefore, the excess wastage itself cannot be the only basis for addition. Even otherwise, unless and until the accounts are defective and not rejected, the excess wastage itself cannot be considered to be the basis for addition. Though, in principle, we are in agreement with the stand of the CIT(A), still since the survey was made on 5.3.2004 and assessee made the claim of 22689.656 kg. as wastage the daily wastage, on average comes to 66.734 kgs. whereas during the impugned period (25 days) assessee showed the wastage of 8897.267 klgs. meaning thereby average daily wastage of 355.89 kgs. This increase is not supported by any commensurate increase in the production by the assessee. At the same time, the claim of the assessee also simply cannot be brushed aside, therefore, keeping in view the overall f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he course of survey, admittedly, these amounts have not been assessed under the head profit and gains business, therefore, the Assessing Officer was found to be justified in excluding 90% of the same from the profit of business for computing deduction under Section 80HHC. In view of these facts, we have not found any infirmity in the impugned order because the surrendered amount cannot be said to be derived by the assessee from the goods or mercantile. The surrender was made by the assessee on the accepted norms that something was hidden by the assessee and was not duly explained. At the same time,it was wilful surrender by the assessee. It is not the case of the assessee that it was a forced surrender. In view of these facts, the assessee cannot claim the same due to the nature of agreed addition/agreed surrender, consequently, this cross objection of the assessee is having no merit. 10. The Tribunal had recorded a finding of fact that the amount of ₹ 20 lacs which was surrendered during the course of survey was never assessed under the head income from business or profession and thus the same was not available for computing deduction under Section 80HHC of the Act. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was interest income was on account of interest received on FDRs maintained for the business purposes and thus was admissible for deduction under Section 80HHC of the Act. 13. Learned counsel for the revenue supported the order passed by the Tribunal. 14. The Tribunal while rejecting the aforesaid contention recorded as under:- 6. Now we shall take up the cross objection of the assessee on the plea that in the impugned order on the ground that the learned CIT(A) erred in not allowing the deduction as claimed under section 80HHC of the Act. The claim of the assessee is that the deduction of ₹ 1,07,941/- under Section 80HHC has been wrongly worked out because the Assessing officer included 90% of the interest receipts and also reduced 90% of ₹ 20 lakhs being the sum surrendered at the time of survey from the profits of the business for computing the deduction. On appeal, the submission of the assessee is that the interest was received by the assessee on FDRs which was maintained for the purpose of taking limits from the bank. For the amounts surrendered by the assessee, it was claimed that it was also a part of business income. 15. No illegality or perversit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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